Archives for July 2011

Innovation Ohio would like to extend our best wishes to Youngstown Mayor Jay Williams as he prepares to mark his last day in office on Monday before taking on an exciting and critical new role. Williams has been selected to become the new executive director of the Department of Labor’s Office of Recovery for Auto Communities and Workers, otherwise known as the “auto czar.”

Williams’ appointment, announced earlier this month, was applauded by Senator Sherrod Brown, who called it “a loss for Youngstown, but a win for the auto sector and the nearly 800,000 Ohio workers whose jobs are tied to this critical industry.” Brown has been a key advocate for federal intervention in the industry.

Since 2009, thanks to intervention by President Obama, both GM and Chrysler have emerged from bankruptcy, recaptured market share, returned to profitability and have even begun to expand. GM recently announced a $204M investment in its Toledo facility in the production of its new 8-speed fuel-efficient transmission. Meanwhile, Chrysler has repaid its outstanding loans to the U.S. Treasury, six years early. And at Lordstown, where prior to the rescue effort, 1,000 jobs were at risk, has now added a third shift and employs nearly 5,000 workers.

In all, it is estimated that 164,654 jobs in Ohio would have been lost if it were not for the auto rescue. We applaud Mayor Williams on his commitment to support the preservation and economic health of Ohio communities and workers dependent on the American automotive industry.

Proponents of educational vouchers frequently say that better choices for their kids are the reason they should be able to take public tax dollars to private institutions. But a new study suggests that what voucher proponents really want are choices for parents. In fact, vouchers have zero positive impact on student outcomes, according to the study.

A review of research on publicly-funded voucher programs by the Center on Education Policy shows that “achievement gains for voucher students are similar to those of their public school peers.” The review also found that rhetoric used by voucher proponents has shifted from a focus on improved student achievement to parent satisfaction and the virtue of choice.

We hope this catches the attention of the Kasich administration, whose policy objective was recently claimed to be exactly the opposite:

“What’s right for students sometimes doesn’t fit with what’s been done in the past,” said Robert Sommers, Kasich’s education adviser. Improving Ohio’s schools will no longer be “adult-driven,” he said.

If the best argument for voucher programs are their convenience for adults, not student success, perhaps the administration should slow down and take stock of Ohio’s existing $80 million program before launching ahead with its plans to quadruple the amount diverted to private schools.

On Friday, it was learned that in the wake of state budget cuts and in anticipation of the Governor’s plan to privatize five prisons, the Ohio Department of Rehabilitation and Correction plans to eliminate 1,135 jobs by the end of the year. In all, approximately 950 workers will lose their jobs, including hundreds of prison guards, nurses, teachers, administrative staff, and even five chaplains. Some of these workers will be able to reapply for their jobs with the private prison operators, but continued employment is far from guaranteed.

The cuts are needed, officials say, to make up for a $188 million reduction in state funding over the biennium. Rather than use the proceeds gained from selling the prisons to private companies, estimated to net $200 million for the state, that money was instead used as a one-time source of funds to prop up the state budget.

By federal law, private employers who plan to terminate 50 or more workers are required to notify the state, who tracks these mass layoff events on its website. The state’s action to reduce the ranks of prison guards, parole officers and other personnel represents the largest mass layoff in the state of Ohio so far in 2011.

As we predicted in April, cuts in the current state budget could have the effect of putting up to 51,000 Ohioans out of work.

Innovation Ohio’s Communications Director, Dale Butland, appeared on Ohio Public Television’s The State of Ohio to debate Jeff Longstreth, campaign manager for Ohioans for Health Care Reform about a proposed constitutional amendment that would allow Ohio to opt out of a new federal law requiring individuals to purchase health insurance.

Toledo air cargo carrier DB Schenker announced on Friday that it is closing its Ohio air cargo hub, a move that will result in the loss of over 700 jobs. The company blamed the move on the poor economy, prompting flashbacks to a similar announcement by air cargo carrier DHL in late 2008 to cease its Ohio operations.

The DHL move did not go unnoticed by Governor Kasich when he was a candidate for office. In his first campaign commercial, shot at the shuttered air cargo facility, Kasich sympathized with displaced workers, speaking of the job loss this way:

The unemployment rate was 8.8 percent in June, an increase from 8.6 percent in May. This is the first time that the unemployment rate has increased since August of 2009, breaking a 22-month streak of unemployment holding steady or decreasing.

The industry with the most significant job losses from the previous month was government, with local governments seeing the biggest losses of 8900 jobs. This likely reflects the first impact of Governor Kasich’s “Jobs Budget,” which contained severe cuts to local governments. Unfortunately as IO warned earlier this year, we are now well on our way to an anticipated loss of 51,000 jobs as a result of Kasich’s budget.

Other items of note from the ODJFS release are as follows:

The number of workers unemployed in Ohio in June increased to 517,000, up from 508,000 in May.

Ohio saw an increase in nonfarm wage and salary employment, with an increase of 10,600 over the month, from the revised 5,095,000 in May to 5,105,600 in June. This includes an increase of 10,900 jobs in the leisure and hospitality industry, an industry that traditionally sees increases in the summer months.

Local governments saw a loss of 8,900 jobs.

The manufacturing sector saw a loss of 3,000 jobs.

The construction industry saw an increase of 2,800 jobs, likely due to summer construction.

The U.S. unemployment rate for June was 9.2 percent, up from 9.1 percent in May.

In 2009, House Bill 1 was passed by the General Assembly and signed into law by the Governor. Included in that legislation was the bold education reform that now, two years later, the current Governor says he wants to achieve. It is really necessary for Gov. Kasich to re-create the wheel?

HB 1 required the Educator Standards Board to develop a model teacher evaluation system that included measuring student achievement as a prominent feature of the evaluation. Ohio’s Race To the Top evaluators explained this provision this way:

“The influence of House Bill 1 (HB 1) in this instance cannot be overestimated. It requires the State Board of Education to adopt credible, comprehensive evaluation models for teachers and principals that include multiple measures of effectiveness including a method for measuring student growth. As a result, the state has developed an effective means of evaluating both teachers and principals after input by both groups.”

Over the last two years, the ESB has developed that system using the input of teachers and principals, as well as researchers and experts. It has been field tested in several school districts this last school year. And, in a somewhat embarrassing dose of reality to Kasich and his friends, it was presented to the State School Board last week, revealing just how pedestrian Kasich’s plan was compared with the deeply detailed ESB work. And you want to know something? Contrary to Kasich & Co.’s claims, Ohio’s teachersunions support this evaluation system, which includes up to 50% of a teacher’s evaluation to be based on student outcomes.

IO has looked at what the Governor’s budget requires the State School Board to develop on teacher evaluation and compared it with what the ESB has already developed. What is clear is that the ESB is far ahead of the Governor’s vision. (See attached chart)

IO requests that in the interest of saving taxpayer money, the state school board should continue working with teachers and principals to further develop this model teacher evaluation tool rather than scrapping it for some new reinvention of the wheel.

For months, IO has said that Governor Kasich’s policies are fundamentally unfair to regular Ohioans and average families. Evidently, a growing majority agrees.

This morning, Quinnipiac University released its latest poll which found that just 35% of Ohioans now support Governor Kasich (down from 38% in May) and shows him “sinking slowly into the quicksand of voter disapproval.”

The poll also explained why—a growing belief among Ohioans that the Governor’s budget is “unfair” to people like them. This, of course, is exactly what we’ve been saying—that John Kasich favors the rich and powerful, but turns his back on working Ohioans.

And now a solid majority is turning its back on Gov. Kasich. Whether it’s his extremist SB 5 and its all-out assault on the rights of public workers, the billions of dollars in unfair cuts he’s making to schools and local government services, or the millions in corporate welfare he’s handing out in things like tax breaks for oil companies, voters have caught on to the Kasich agenda. And what do you get when you help the rich and hurt the rest? A 35% approval rating. Which we believe will continue to fall, in the Governor’s vernacular, “at the speed of business.”

The Columbus Dispatch reports that Moelis won Kasich’s gambling consulting contract despite not being the lowest bidder. The Dispatch also says that Moelis’ payoff was $15.6 million, not the $13 million originally reported. Not surprisingly, the paper quotes a gaming industry expert as saying that Moelis is “overcharging the state” and that the fee is “excessive.” He notes that his firm, which also bid on the contract, “would have done it for a third of what Moelis is making.”

As Innovation Ohio spokesperson Dale Butland put it in the story, “it’s unusual to pick a second place finisher in a competitive bid.” And “the sweet deal Moelis got was crazily out of alignment.”

This news is in addition to Innovation Ohio’s report of a troubling relationship between Penn National and Moelis. Is this the beginning of Moelis-gate?

Advocates for Ohio’s unemployed have recently criticized legislative leaders for failing to pass a bill to update Ohio’s unemployment insurance program, which would have enabled the state to receive an addition $176 million in federal stimulus funds. This is the larger of two distributions set aside for Ohio, but to be eligible, the state must first adopt two of four policy changes by August 22 to modernize its Unemployment Insurance laws.

The four expanded coverage options are:

Eligibility for part-time workers

Benefits for leaving work due to domestic violence or other compelling family reasons

26 weeks of pay while enrolled in approved training

Minimum dependent payment of $15 per week up to $50

GOP leadership refused to take up a measure, choosing instead to go home for the summer without action. The money – $176 million – could be spent on providing benefits to unemployed workers, allowing them to stay in their homes and support their families while looking for work.

Why did the General Assembly leave workers hanging? According to Gongwer, Senate President Niehaus expressed concern about cost:

“We were never able to get an answer as to how much this would cost in the long run,” he told reporters after session. “The question became: if we take $176 million now, how much will be obligated to pay out for the next 10, 20, 30 years? And no one could answer that question, so we chose to pass.”

It really begs the question: whom did he ask? Innovation Ohio obtained a 2009 memo from the Ohio Department of Job and Family Services that showed by phasing-in two of the four policy changes (minimum dependent payments and 26 weeks of training), the state could actually save money in the long run. So if cost is not the real issue, we have to wonder: is this really part of an anti-worker, anti-middle class agenda, consistent with other policies we have seen from this General Assembly and Administration?

More money for unemployed Ohioans, and savings for Ohio’s Unemployment system. It’s really a no-brainer.

Innovation Ohio Applauds Cordray Nomination

IO President calls former Ohio AG “the perfect choice”

Columbus—Janetta King, President of Innovation Ohio, said today that Richard Cordray was the “perfect choice” to head the new Consumer Financial Protection Bureau (CFPB).

King’s comments came after the White House announced earlier today that President Obama has decided to nominate Cordray as the new agency’s first Director. The previously leading candidate to head the CFPB, Elizabeth Warren, had drawn fierce opposition from Republicans who threatened to filibuster her appointment. The CFPB is being created in the wake of the housing crash and the Great Recession to protect consumers from abusive lending practices by banks, credit card companies, mortgage lenders and others. It is scheduled to begin operations later this month.

Said IO President King:

“Rich Cordray has all the tools needed to head this important agency. As a graduate of the prestigious University of Chicago law school, a law clerk for Supreme Court Justice Anthony Kennedy, a stint as Ohio Solicitor General, and three years as Ohio’s Attorney General, Rich has repeatedly shown that he has the intellect, temperament and judgment necessary to excel in this important job.

“But in addition to his gold-plated resume, Rich Cordray also has a wealth of experience in tackling the kinds of consumer issues the CFPB is designed to address. As Ohio Attorney General, he went after financial firms for fraudulent and shoddy mortgage servicing and foreclosure practices—and built a solid reputation as a fierce but fair consumer champion. Here in Ohio, Democrats and Republicans alike know Rich to be smart, savvy, and eminently reasonable. He’s earned enormous respect on both sides of the political aisle.

“Finally, Rich Cordray is that rare nominee who understands finances, economics and fiscal realities and combines it with a solid law enforcement background. President Obama could not have found a better candidate or made a wiser choice. We can’t wait for the rest of America to find out what we Ohioans already know about Rich Cordray. We look forward to what we hope and believe will be a speedy confirmation process.”

On Tuesday, the Office of Budget and Management released the monthly financial report for June. In it, OBM validated what Innovation Ohio reported last month: Governor Kasich’s frequent claim that the state faced an $8 billion dollar deficit was never true. The report indicates that in fiscal year 2011, which ended June 30, the state collected nearly $1 billion ($973 million to be exact) more revenue than was forecast, reducing the gap between actual expenditures in the last two-year budget and available revenue in the upcoming biennium.

The OBM report validates our claim that through increased revenue in fiscal year 2011, better-than-expected revenue growth in fiscal years 2012 and 2013, and the availability of new sources of one-time money, the actual gap that budget-writers faced was closer to $5.1 billion, not $8 billion.

Since 2009, Kasich and Ohio Republicans have repeated the dubious claim that the state faced an $8 billion hole in the upcoming budget, justifying draconian cuts to schools and local governments and then ramming Senate Bill 5 through the General Assembly as a “tool” to ease the pain at the local level by eliminating workers’ collective bargaining rights.

Today, Innovation Ohio alerted Ohio’s press corps to a potentially troubling linkage between Moelis & Co., the New York-based consulting company, hired by John Kasich to negotiate with casinos, and one of the two casino owners, Penn National. We find that in 2009, Moelis worked for another client who agreed to pay them more if they could secure a deal with Penn. Given that the Governor’s agreement with Moelis had Ohio taxpayers compensating them with a bonus of up to $13 million if they could reach a deal with Penn, we believe the two companies’ prior relationship, and whether it was disclosed to the State of Ohio merits further exploration.

INNOVATION OHIO:
IS MOELIS IN BED WITH PENN NATIONAL?

ColumbusInnovation Ohio, a progressive think tank headquartered in Columbus, said today that it has uncovered a potentially troubling linkage between Penn National Gaming and Moelis & Company, the New York-based consulting firm that earned a reported $13 million to help Gov. John Kasich strike a deal with Ohios casino and race track owners.

Innovation Ohios discovery comes on the heels of a July 9 column by Brent Larkin of the Cleveland Plain Dealer who called Moelis $13 million fee astonishing, preposterous and an unprecedented gift which is deserving of more scrutiny. .

Innovation Ohio said that in 2009-10, Moelis had a consulting contract with Fontainebleau Las Vegas, LLC to help that firm sell an uncompleted and bankrupt hotel and casino project. The contract, which paid Moelis at least $750,000 in consulting fees, contained a curious provisionSection 3 (A) (ii)specifying that if Penn National bought the Fontainebleau property, Moelis would receive an additional fee totaling 3% of the transaction value. If anyone other than Penn National bought the property, Moelis would receive 1% of the transaction value. Either payment would be in addition to Moelis consulting fee. Read the contract here.

In addition, Innovation Ohio said it is our understanding that the Kasich administration has either stonewalled or rejected outright public records requests for information relating to the administrations decision to retain the Moelis firm for Ohios own negotiations with Penn National and Rock Ventures.

What, exactly, is Moelis past and current relationship with Penn National?

Why was Penn National singled out in Moelis contract with Fontainebleau Las Vegas?

Why would Moelis receive a bonus of 3% of the transaction value if Penn National purchased the Fontainebleau property? Or 1% of the purchase price if Penn National didnt buy it? Why would Fontainebleauor Moeliscare about Penn Nationals involvement?

Since Penn National was one of the gaming firms with whom Gov. Kasich would be negotiating, did Moelis ever disclose its previous and/or current relationship with Penn National prior to being retained by the state?

There may well be satisfactory answers to all of these questions. But since Ohio is paying Moelis $13 million for consulting efforts characterized by the Plain Dealers Mr. Larkin as work that a bright, well-prepared fifth-grader could have performed as a homework assignment, it is entirely reasonable to insist that answers be forthcoming.

If you’re like most Ohioans, you probably don’t read the Wall Street Journal and therefore may have missed Ohio House Speaker Bill Batchelder’s July 2 Op-Ed celebrating the repeal of Ohio’s Estate Tax. No worries, as the Ohio House Republicans have archived the article on their blog.

In response to the Speaker, Innovation Ohio wrote a letter of our own, which was printed by the WSJ in today’s edition. We share a copy of our letter in full, below:

The Sad Death of Ohio’s Death Tax
Ohio House Speaker Bill Batchelder and his co-authors Jack Boyle and Dick Patten omit a few important facts in “Ohio Shows the Way on Death Tax Repeal” (Cross Country, July 2), like how their primary rationale for repeal was debunked by the Dayton Daily News on June 28. The newspaper found no “solid statistical evidence,” either for the claim that the estate tax has led to an exodus of jobs and businesses, or that it causes family farm and business heirs to sell in order to pay the tax.

The authors downplay the financial effect of repeal by disingenuously asserting that local governments receive only “a portion” of estate tax revenue. In fact, they receive 80%. The percentage matters because Ohio’s recently passed state budget also cuts the Local Government Fund, which helps pay for police, fire and emergency response, by a whopping 50%. Those cuts, coupled with the coming 80% loss of estate tax revenue ($230 million in 2010), virtually ensure local tax hikes.

Though Ohio’s estate tax affects only the wealthiest 7%, both its threshold and its rate are outdated and need reform. That is why Innovation Ohio, the progressive think tank with which I am affiliated, proposed mending it by raising the threshold to $1 million (the top 2%) and the tax rate to the national average of 16%. Instead, Mr. Batchelder and his allies chose to eliminate a tax on the top 2% and require the bottom 98% to pay for it. Now that’s class warfare, Republican-style.

As for the hoary claim that the estate tax is why wealthy Ohioans move to Florida and other Sun Belt states, weather seems a far likelier explanation. Hawaii is a popular retirement destination, despite its estate tax.

You may recall that prior to the start of the House-Senate Conference Committee on the state budget, we released a summary of the key provisions we would be watching. As a service to our readers, we’ve revisited that document, providing updates indicating those changes that were included in the final version of HB 153, signed into law by Governor Kasich on June 30.

You can download a copy here. And check out our June 30 press release in which we explain that the budget is a “job-killer that rewards the rich and hikes local taxes.”

Ohio’s new state budget calls for spending $5.6 million on the OCC in the fiscal year that began July 1 and $4.1 million the following year. Those amounts are down from $8.5 million each year of the previous budget.

Gov. Kasich used a projected deficit to justify many budget cuts, but the Consumers’ Counsel does not affect the deficit since it is funded by fees that utilities pay.

A spokesman for the OCC predicted the deep cuts would lead to higher utility bills because the agency will lack the resources needed to battle the politically potent, well-financed utilities.

Higher rates could hurt Ohio’s business climate. A 2010 study by Deloitte, lists “energy costs and policies” among the top drivers of global manufacturing competitiveness. Today, energy costs in Ohio are about 10 percent below the national average.

When the Kasich budget debuted, spokesman Rob Nichols said the cut was necessary because the agency duplicates services provided by the Public Utilities Commission of Ohio – a justification The Plain Dealer of Cleveland said, “reflects a fundamental lack of knowledge about utility regulation in Ohio that Kasich’s team had better correct, forthwith. ‘’

The PUCO has a reputation for being too deferential to utilities. Earlier this year, the PUCO rejected a compromise agreed to by a central Ohio utility and its customers – then issued a ruling even more generous to the utility.

Innovation Ohio’s Communications Director, Dale Butland, appeared on WOSU-TV’s Columbus on the Record program on Friday evening. Dale joined fellow panelists Laura Bischoff, Ann Fisher and Terry Casey and host Mike Thompson in a discussion of SB5 petition signatures, tax breaks in the state budget and new abortion legislation.